Today's stock market
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Retail stocks had a good day today, with the SPDR S&P Retail ETF (NYSEMKT:XRT) gaining 1.2%. Interest rate-sensitive utilities closed a down week with another loss; the Utilities Select SPDR ETF (NYSEMKT:XLU) fell 0.8%.
CarMax steps on the gas
Used-car seller CarMax reported fiscal second-quarter results that exceeded expectations for both sales and profits, and investors drove the stock price up 7.8%. Sales and operating revenue increased 9.7% to $4.39 billion and earnings per share rose 16.7% to $0.98. The consensus analyst estimates were for the company to earn $0.95 per share on revenue of $4.25 billion.
Comparable-store unit sales rose 5.3%, which is less than the 8.2% increase last quarter, but an improvement on growth of 3.1% in the quarter a year ago, and included the impact of Hurricane Harvey on six stores in the Houston area. The average selling price per unit grew 0.7% from a year ago and the number of stores increased 12%, with the net result being a jump in used vehicle sales of 11.9%.
Earnings grew 11.7% to $181.4 million, but what propelled EPS at a higher rate was CarMax's aggressive share buyback program, which has reduced share count by 4.6% since the year before to 185 million, including 2.5 million shares repurchased in the second quarter.
Investors were obviously pleased that CarMax reported another successful quarter after having turned in surprisingly good sales in its first fiscal quarter. The fact that Harvey didn't make a big dent in the business was no doubt a positive, and the combined effect of recent storms may have investors looking forward to a spike in demand for cars to replace those destroyed by flooding.
Finish Line stumbles out of the gate but recovers
The stock of mall-based shoe seller Finish Line gyrated wildly after the company reported Q2 earnings this morning. The release caused the stock to open 10% below yesterday's close, reverse itself following the conference call to a gain of over 11%, eventually settling to close up 5.5% at the end of the day. For the thirteen weeks ended Aug. 26, sales decreased 3.3% to $469.4 million, comparable-store sales fell 4.5%, and non-GAAP earnings per share came in at $0.12, compared with $0.56 in the period last year.
The striking thing about the stock's movement in response to the news was the fact that there actually wasn't much news at all. The company had announced the second-quarter numbers in a preliminary release on Aug. 28, which caused the stock to plunge 18% in a single day. At that time, CEO Sam Sato said in the press release, "The marketplace for athletic footwear became much more promotional as our second quarter progressed resulting in challenging sales and gross margin trends."
The rise in the stock price was perhaps a sigh of relief by investors that no more bad news had developed in the last month, as management reiterated earlier guidance. Finish Line has been hit with the double whammy of slumping mall traffic and a slowdown in sales of high-end sneakers, a combination that caused competitor Foot Locker to lose a quarter of its market cap last month. Today's gain may just have been a breather from what has been months of bad news.